Today in the middle of the afternoon Canes Twitter lit up like a Christmas tree with rumblings that the Carolina Hurricanes were in the process of being sold for $500 million to Chuck Greenberg.
— Scott Soshnick (@soshnick) July 13, 2017
While everyone was scrambling around to figure out who Scott Soshnick (original Tweet I saw) and Chuck Greenberg were, some amount of validation arrived in the form of a report locally from Jeff Gravley locally at WRAL and from TSN.ca.
Important to clarify is that the deal has not been reported as completed. As of my starting to write this, the team has not announced anything. But based on who has now reported the deal, it seems reasonable to classify this is significantly more than run of mill mid-July rumor garbage.
I posted a few quick thoughts on Chuck Greenberg and the deal shortly after the initial Twitter blip.
What follows is a more detailed analysis of the possible transaction on multiple levels.
I will follow up with more on Chuck Greenberg bio-wise at a later time, but I figure enough of the mainstream media will cover that maybe I do not need to and am better off just skipping that and jumping in a level or two deeper.
Very important disclaimers: The deal is NOT official or final, so there is a chance that nothing happens at all. In addition, there has not yet been any indication of what the ownership group looks like. That could significantly change things. Finally, there is no talk of any kind of related deals. Most significant would be if Greenberg actually used pre-deal leverage to negotiate something favorable to extend with the arena authority. More broadly, any number of details could change my view on the deal.
The team has been for sale for almost a decade
Most people do not know this (the N&O seems to conveniently forget it every year when it writes its annual August Hurricanes article), but in one way or another, the Carolina Hurricanes franchise has probably been for sale or at least planned to be sold at least in part for almost a decade. When Peter Karmanos’ partner passed away, Karmanos purchased his half and in the process likely started a temporary and/or unstable ownership situation that would eventually be resolved by at least a partial sale. Prompted by one of the aforementioned N&O articles, on August 26, 2015 (less than a month after Canes and Coffee launched), I wrote out the long history of the Hurricanes being for sale. There have been a few new chapters since then and another Canes fan off-season rite of passage by the N&O again last summer, but the basic story is the same.
What changed over the years was what exactly was for sale and the urgency of selling it. The original iteration saw Peter Karmanos trying to strike a deal with a group of minority owners who would get tiny pieces of the team, no real control and mostly just the right to share in annual losses by writing a check at the end of each season. Not surprisingly that version of the sale did not go incredibly well.
But the Hurricanes did add a few minority owners. Because of terms that allowed them to opt out at a later date, it is unclear how many from that original group are still in the fold.
Without getting into the details, along the way Peter Karmanos’ and the team’s financial situations both changed. The team does not report its financials publicly, but it is not hard to figure out that the team has had a tough time of it financially of late with decreasing attendance and no playoff revenue. Somewhere along the way the discussion of selling the team shifted from minority owners to selling the franchise in full or at least majority.
That just prompted another off-season rite of passage for Hurricanes’ fans. In addition to fending off the local newspaper in August, we also added the joy of intermittent rumor assaults often in French out of Quebec. But suffering and fan base adversity aside, the transition set the stage for a sometimes stressful wait to see what was next and what it meant for the franchise and more directly the franchise in Raleigh.
Were the Carolina Hurricanes ever at risk of moving?
There are two answers to this question, so let me address them separately.
The common theory that because the Hurricanes were for sale and there did not seem to be a local buyer meant relocation has always been (sophisticated term) crap. Many professional sports teams have out of town owners, and local versus out-of-town ownership does not dictate success. The logic that coupled where the next owner lived with where the team would move to was just horribly flawed. In addition, the overt stubbornness of the NHL in terms of maintaining markets is worth noting. Yes, teams have moved with the most recent being the Atlanta Thrashers, so it is not impossible. But at the same time, the league has endured calamity, catastrophe and financial ruin worthy of hockey Armageddon and still held steadfast to its original belief that the NHL belonged in Arizona. So it is not as if Gary Bettman just willy-nilly lets team be sold and then grants new owner the right to take the team wherever he or she wants – quite the opposite actually. The short version is that the team being sold to a non-local would not dictate a move and in fact the NHL actually serves as an anchor that makes it very hard to move teams.
But the flip side does have some legitimacy. Any kind of sale of the team, especially during challenging times financially, did introduce significant uncertainty. I feel confident in saying that the chance of the team moving, for reasons outlined above, was never high, but I fully admit that as long as the team was for sale, the chance was something meaningfully more than zero. I also fully admit that this is the one and only thing about Carolina Hurricanes hockey that has caused me to lose sleep.
So would a Chuck Greenberg purchase eliminate the chances that the Hurricanes move?
For me, it goes like this…Near the top of the press release and at the front end of the conference call if/when a deal is announced will be a firm statement that the team will be staying in Raleigh. Unless this is accompanied by something contractually, this is a marketing statement.
It does not mean that it is a lie. And it does not mean that staying in Raleigh is not the intent. But there is nothing binding in Chuck Greenberg, Ron Francis or anyone else saying that (again if not included in the contract).
So while acknowledging that there are no 100 percent guarantees upfront and that the press release and press conference are not the places to look for proof, I do think this transaction significantly increases the probability that the team stays in Raleigh. Further, I think this transaction represents the absolute best outcome for maximizing that probability, and here is why…
* Chuck Greenberg does not have ties to another hockey market. He is a Pittsburgh guy by origin and a Texas guy since then. He very clearly does not take over the Hurricanes with a “I want to buy a team for my town” bias.” The worst case scenario would have been a group based in Quebec coming into Raleigh and talking about how they were going to keep the team here. Pending here is any kind of revelation about what the ownership group looks like.
* As a new owner, especially with professional sports marketing expertise (see below), the new ownership will undoubtedly make some changes and aim to boost the business side of things. Those initiatives are likely to yield returns that will improve the business.
* The runway is there. At the end of the day, a business that loses money every year for forever in Raleigh is not viable. But with some changes and hopefully fortuitous timing in terms of winning hockey, the nearly certain runway is adequate to prove the business is viable in Raleigh. Exact details on possible early exit with fees are murky, but at a basic level, the Hurricanes lease at PNC Arena runs through 2024. That makes it cost-prohibitive (not impossible) to leave before then and adds an incentive to at a minimum give Raleigh a go long enough to assess viability.
So while the ownership change does not assure the team’s future in Raleigh, it significantly boosts its probability in three ways. First, Chuck Greenberg (pending any information on a broader group) does not have a geographical tie/incentive to want to move the team. Second, the new owner(s) will likely make a go/no-go decision on Raleigh based on the business which has up to a 7-year runway based on the current arena contract. Finally, Chuck Greenberg comes at the business from a sales and marketing angle which is likely to yield improvement aside from whatever gains are realized from the team improving.
The marketing and business side history of the Carolina Hurricanes
Aside from removing the specter of ownership uncertainty, that last point easily rates second in terms of important factors in this deal.
From the very beginning and through multiple personnel transitions in Hurricanes history, the team has mostly been light on marketing expertise at the top of the organizational chart. Owner Peter Karmanos was a businessman for his day job, but as far as hockey goes, he always seemed more inclined to help Jim Rutherford build the roster than whoever else help build the business. And as a commuter from Detroit, he was close enough to be involved in the important day-to-day part of it.
Jim Rutherford was the same. In his early days, he ran the hockey operations and also the business side of things for a lean operation. There was never a doubt that he was a hockey guy first and probably only a business guy if there was extra time remaining.
To Ron Francis’ credit, after being named general manager after Rutherford’s departure, he moved quickly to add more focus to the business side. Recognizing that the business side was not his strength and probably more significantly that the role required someone with 100 percent focus, Francis quickly moved to split his role and add a business side executive.
Francis made a move to shore up the business side when he brought on former Atlanta Thrashers’ President Don Waddell. Waddell’s announcement immediately set off blaring warning sirens. After a fifth consecutive playoff off miss from the 2013-14 season, someone chose to announce the addition of the man at the helm of the Atlanta Thrashers when they moved and to do it right dead center in the middle of the July 1, 2014 free agent frenzy. The announcement of Waddell’s addition right when the loyalist of fans were tuned in and hoping desperately for a free agent addition of significance maybe too painfully signified how out of tough the team had become with its fan base.
On a more tactical level, while Francis’ move to bring in someone who could focus 100 percent on the business side made total sense, Waddell’s background reads “hockey man” just like the others. His resume has the usual hockey coach, scout and general manager, and certainly there were many factors, but the Thrashers’ departure was not exactly a glowing accomplishment on the business side.
I conveniently left out one significant part of the team’s history on the business side. Now 17 years ago and in a somewhat understated role that only old-timers with good memories would even remember is Jim Cain.
The Hurricanes two-jump flight from Hartford to Raleigh was a bumpy one. The team landed in Greensboro as a lame duck sports franchise scheduled to leave town in two years. The Hurricanes faced significant headwinds recruiting fans locally since they were moving in two years and also challenges selling the nasty 1-hour commute on I-40 to fans in Raleigh. Not surprisingly, the team struggled in Greensboro, but more significantly, the team did not get the usual immediate excitement pop as a new team when it landed in Raleigh since the franchise sort of arrived two years prior.
The team seemed out of touch with its fan base and seemed to think that “Hey! We have professional sports in Raleigh. Everyone come!” would be good enough to pack the then Entertainment and Sports Arena. It did not. A couple years into the gig in 2000, the team hired local lawyer Jim Cain as the President and Chief Operating officer. Cain had a number of responsibilities in that role, but most significantly he completely transformed the business side of the organization to be customer-centric. Among other things, he built a big list of fans’ issues dubbed a “Contract with the Fans.” He shied away from nothing, addressed almost everything and reported to the fan base as he knocked things out.
Not sure if anyone remembers this, but at one point tailgating was actually prohibited by the Hurricanes. Some people still sort of did it, but it was technically not allowed, and even the unauthorized version was limited by the late parking lot open times, and many of those that did tailgate did so outside the parking lots down the road. That’s right. The Hurricanes massive pastime of tailgating was actually outlawed until Jim Cain ended the prohibition in addition to making numerous other fan-friendly changes.
The fact that the Hurricanes made the playoffs in 2000-01 and then the Stanley Cup Finals in 2001-02 obviously helped attendance, but lost beneath that is the huge role that Jim Cain played in building the first iteration of the Carolina Hurricanes community. Like a true hero who does what’s right without looking for glory or recognition, Cain quietly left the organization after the 2002 playoff run.
If anyone is still reading, you are certainly wondering how my detour to 2000-02 Hurricanes minutiae and Jim Cain is at all relevant to the possibility of the team being sold.
So finally getting to the point…Chuck Greenberg does have a hockey background and has undertaken some of the ‘sports operation’ type roles along the way. Especially in hockey (remember he has been a baseball guy for awhile now), his wheelhouse is the marketing, sales and fan side of things.
He has experience with successful minor league baseball organizations. For minor league baseball, there is incredibly little ‘sports operations’ work. Most of your roster comes from the major league team you are affiliated with. In addition, the winning/losing and the roster does not drive the business. Most people who attend games could care less who the players are or what place the team is in.
Put simply, minor league baseball is sports entertainment. Success off the field is driven by two things. First, success is driven by whether people have fun and have a good entertainment experience. If they do not, it quickly becomes really hard to fill seats by constantly finding new people to replace the last group that did not have fun and therefore did not return. Second, success is driven by the ability to market that fun in the community and sell casual fans on the fact that your entertainment option is as good or better than the dozens of other possibilities.
As demonstrated by the countless empty seats around the loyal pure hockey fans that remain, the team which maybe lost its way after the Stanley Cup win and leaned too heavily on selling hockey and winning desperately needs to get back to selling the entertainment that will pull back in casual fans.
My optimistic hope is that Chuck Greenberg possibly with some fresh blood will do exactly that.
A couple other asides
The timing is perfect for someone to buy the team
It took a few years, but I think the team really is pretty close to rock bottom in attendance and therefore revenue finishing dead last in the NHL in attendance in 2016-17. In terms of valuing the team in a negotiation using actual financials, the team should be pretty close to a low point. That theoretically should decrease price.
But the timing and trajectory are also good in terms of bouncing off that bottom. Ron Francis has cleaned up the contract slate such that the team’s budget is both lean and pretty strong relative to the amount spent. The team is also young. And most significantly, it seems to be trending upward.
So a new owner has the best of all worlds right now with the ability to negotiate based on a tough 2016-17 season but also a near-term future on the ice that looks reasonably promising.
Ideal timing of an announcement
Based on the limited information available, it is impossible to say how close a deal is to being struck, but if it was in fact completed, the team would want to wait until at least Monday to announce it. The ACC Kickoff started Thursday and continues through Friday which has a significant part of the Raleigh sports media out of town and the local sports audience focused on football. Best case would be if the deal was already completed, but the team was waiting for more of a spotlight to announce it early next week.
What say you Canes fans?
Do you agree that a sale of the team to a group with a high probability of staying in Raleigh would be the best news since June 19, 2006?
What are your thoughts on what you have heard so far?